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Hedge fund manager timing and selectivity skill over time. A holdings-based estimate

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  • Aiken, Adam L.
  • Kang, Minjeong

Abstract

We study the performance of hedge fund firms from 1999 through 2017, employing a holdings-based approach to decompose overall performance into stock selection and three distinct timing abilities: market return, volatility, and liquidity. In particular, we introduce a liquidity timing ability for the first time using a holdings-based measure. In aggregate, we find evidence for stock picking skill that diminishes over time, but little evidence of timing ability. We find weak evidence that managers exhibit persistence in selectivity skill. At the individual hedge fund firm level, bootstrap analysis suggests that the top managers’ selectivity skill can be separated from luck.

Suggested Citation

  • Aiken, Adam L. & Kang, Minjeong, 2023. "Hedge fund manager timing and selectivity skill over time. A holdings-based estimate," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008115
    DOI: 10.1016/j.frl.2023.104439
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    More about this item

    Keywords

    Asset pricing; Hedge funds; Selectivity; Liquidity timing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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